Invisible hand sound like monster from hooray movie, but in economic term it was a theory buy adam smith, What adam smith say that “Invisible hand” determines what gets produced, how, and for whom.In his views the prices signals and response of the marketplace were likely to do a better job of allocating resources than any government could. (Bradley R.S 2002)
In my point of views invisible hand is a selfishness act and it will not disturbed the resources fairly. First Public good will be underproduce , as B.R. Schiller say that when market failure, “ the market tends to underproduce public goods and overproduce private goods.” Because of “free rider” a free rider mean “An individual who reaps direct benefit from some one else purchase (consumption) of a public good.” because of Public good can be consummation by unemployment (no income ) user and pay taxes user.when Invisible hand apply the public goods will be greatly underproduced and it cause many problem (Bradley R.S 2002)
A real life example as Gavin Tee say “Public transportation such as MRT or LRT are supposed to be built to take care of working class people. A lot of people cannot afford to stay out of town simply because there is no public transportation. That’s why prices in the city centre increased because the supply from the outskirts is not in demand. If there is MRT from Kajang, for example, and the ticket price must not be too high, then prices can be lower, say RM200K. There would then be a lot of choices.” so that mean when Public transport is less make all the house expensive and more unemployment rate too. (Gavin tee 2012)
Secondly problem will be externalizes cost problem, what is externalities problem ? Externalities mean “Costs (or benefits) of a market activity borne by a third party; the difference between the social and private costs (benefits) of a market activity” (Bradley R.S 2002)
When some product is not control producing it cause a social cost need to pay. A real life example will be in Ipoh As a new letter show in asian sentinel say that “ a rare earth plant developed in the 1980s ended up contaminating air and groundwater at Bukit Merah near Ipoh. Several people were treated for various cancers because of the plant and later died. Mitsubishi Chemical Corp., which developed the plant, has spent an estimated US$100 million in the effort to clean up the environmental disaster.” (http://asiasentinel.com/(2012) )
Because of the government not controlling the factory at the end it cause environment disaster and a social cost was form .
The last but not least, that is Restricted supply, what mean by restricted supply basically mean monopoly, monopoly mean “ a firms that produces the entire market supply of a particular good and services” (Bradley R.S 2002)
when monopoly happen the product can be very high price and limited supply, when this is happen the poor getting poorer the rich getting richer A real life example as a interview with Barry c. lynn say that “This recession hasn’t ended this fundamentalism. What’s behind it is private governance of the political economy and eventually the politically system. That’s what free-market fundamentalism aims at. As a belief system, it was put out to trick people to allow this [bankers’] coup to take place, this privatization of governance and control.
Among the elites especially, there are all of these beliefs in these different mechanistic forces people see out there. Some think of the free-market as a mechanical apparatus that yields certain outcomes and we can’t do much about what the market decides. Others see globalization as a natural force that leads us to an interconnected world where we will be increasingly tied to China or India.” that prove that a monopoly cause many problem on political, social and more.